On Thursday, Asian shares experienced significant losses. A downturn in global tech stocks prompted investors to move towards safer assets, such as short-dated bonds, the yen, and the Swiss franc.
Central Bank Intervention
China’s central bank surprised markets for the second time this week by initiating an unscheduled lending operation on Thursday at significantly lower rates. This move suggests that authorities are trying to inject more monetary stimulus into the economy.
This new lending facility follows the central bank’s decision to cut several benchmark lending rates on Monday. China’s stock markets reacted negatively, interpreting the central bank’s urgency as a sign that deflationary pressures and weak consumer demand are more severe than previously thought. Earlier this month, China reported weaker-than-expected GDP data.
Market Reactions
“The fact that the scale is bigger than 10 basis points suggests there’s more to come in terms of benchmark rate cuts,” said Lemon Zhang, FX & EM macro strategist at Barclays. “I would think it helps on the margin. But after all, you still have a very subdued growth momentum.”
By midday, the Shanghai Composite Index was down 0.42% at 2,889.62 points, and the blue-chip CSI 300 Index fell 0.59%. Key sectors experienced mixed results:
Financials, consumer staples, and healthcare fell between 0.03% and 0.73%.
The real estate index rose 0.92%.
In Hong Kong, Chinese H-shares dropped 1.73% to 6,036.17, while the Hang Seng Index decreased by 1.42% to 17,064.97. However, the smaller Shenzhen Index rose 0.53%, the ChiNext Composite Index inched up 0.1%, and the STAR50 Index, focused on technology, climbed 1.13%.
Regional Overview
Around the region, MSCI’s Asia ex-Japan stock index was down by 1.00%. Meanwhile, Japan’s Nikkei Index saw a significant retreat, dropping 2.89%.
With Inputs from Reuters
